LONDON, Aug 25 (Reuters) - Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them.
Investors are once again starting to get the ‘debt-ceiling jitters’ as the deadline approaches for the U.S. Congress to lift the limit on the federal government’s borrowing authority amid persistent bickering between lawmakers and the Trump administration. While still weeks away, some corners of the Treasury market are showing signs of strain, and market participants predict a choppy September for stocks and bonds as the debate heats up in Washington. The last major standoff over lifting the debt ceiling occurred in mid-2011 and ultimately cost the United States its prized triple-A credit rating from Standard & Poor’s. It also came close to tipping U.S. stocks into a bear market, defined as a sustained decline of 20 percent or more. During the 11 trading days that marked the height of the crisis, the S&P 500 fell 16.7 percent, which still stands as its sharpest decline over any comparable period since the 2007-2009 financial crisis.
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UK Brexit minister David Davis has a hill to climb next week to generate the “significant progress” London needs to trigger a swift start to trade talks and it seems no coincidence that the accumulated noise around the discussions has the pound hinting at another major slide. Record short positions, seen as a big barrier to more sales of the currency since last autumn, are a quarter of what they were. So, if the big speculative players want to, there is plenty of room to attack and a number of major banks calling for more weakness. But the picture is not totally one-sided. Others argue that the 20 percent fall in sterling against the euro over the past year puts it way past any idea of fair value. Sterling is 8 cents from $1.20 - widely considered the key long-term low from last year - but only 1.2 percent off record lows against the BoE’s currency basket. The latter might be threatened quickly if there is a more dramatic split around the talks.
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Amazon is ramping up the competition in the food retail space at home and in Europe after Thursday’s announcement that the online giant will cut prices at Whole Foods Market, the bricks-and-mortar supermarket it is set acquire on Monday. The prospect of more aggressive pricing adding to the litany of structural challenges facing the sector has dented share prices, with Dutch food retailer Ahold Delhaize, which sources around half of its revenue from the United States, tumbling to its lowest level since January 2015 on Friday. Ahold’s shares have already lost more than 22 percent so far this year, the worst in European retail followed by Carrefour, Tesco and Morrisons. The deal also threw M&A in the food retail sector back into the spotlight, with some analysts speculating British online grocer Ocado was an acquisition target, and that Kroger could be eyeing up Ahold.
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After rising between 6 to 7 percent each against the declining dollar in the first six months of the year, the currencies of Thailand, Indonesia, Taiwan, South Korea, Singapore and elsewhere in Asia have plateaued. Analysts suspect many of the region’s central banks are intervening, both to prevent excessive currency strength and to build up FX reserves. Malaysia’s FX reserves climbed above the $100 billion mark for the first time in two years this month and Thai authorities, loath to draw the ire of U.S. Treasury authorities with any overt intervention, are considering measures such as curtailing bond sales to rein in the baht. Meanwhile, the possibility of little to no appreciation in the currency is reducing the attractiveness of local currency bonds for foreign investors. Data from central banks and local bond market associations in India, Indonesia, Thailand, Malaysia and South Korea showed foreigners bought $5.5 billion in these bond markets in July, which is the lowest in four months.
* GRAPHIC-Foreign money flows into Asian bonds slow in July –
* Thai c.bank considers measures to limit FX speculation–
* Malaysia’s c.bank reserves rise to $100.4 bln as of Aug 15 -
Euro zone inflation data on Thursday will show whether the strength of the single currency has held down prices in the bloc as imports become cheaper. Investors and the European Central Bank - which is eyeing the end of its ultra-easy monetary policy - appear unfazed by the euro gaining more than 12 percent against the dollar so far this year. Over the last few months, a key gauge of financial markets’ long-term inflation expectations has held relatively stable despite the euro’s gains. Analysts say the reason for this is a firmer belief in underlying economic conditions and what they mean for the inflation outlook. Core inflation in the bloc, which strips out volatile food and energy prices, has risen to its highest level in nearly four years. Economists are expecting a slight dip in the core rate this week, but a rise in the headline rate which should comfort ECB policymakers ahead of a key meeting next month.
* Low world inflation dogs central bankers, even as economies grow
Compiled by Nigel Stephenson; Editing by Toby Chopra